by Doug Cloward

Wolf, wolf, wolf! There are wolves in the flock! This cry of alarm from a self-proclaimed shepherd of the direct selling pasture is neither prank nor the effect of fanatic “sky is falling” hysteria. The wolves are among us in direct selling sheep clothing, and the shepherds have lowered their staff of defense.

The wolves of which I speak are those direct selling companies, DSA members and non, whose compensation systems are largely dependent on the revenues of fees they charge their distributors. They are companies whose consumer products cannot sustain sufficient margin to drive their sales organization. Therefore they seek to employ methods to “artificially build and support” their network salesforce with a variety of wolf schemes. Because we have not seen through sheep’s clothing we have allowed these wolf companies and their tactics into the fold. Again, I call wolf!

Companies that resort to selling training programs, sales aids, kits and other business support tools to fund their businesses, knowingly or unknowingly, establish what amounts to a pyramid system. Systems that are dependent on the buy-in of newcomers to fund the profits for those who got into the deal earlier are using classic pyramid technology. In reality they are selling “opportunity.” Often, the program requires some token business activity to qualify to share in the “booty” of the future participant’s buy-in “investment.” These types of compensation plans and their “legitimizing” requirements amount to the purchase of a position in a chain of participant fees. They are illegal, unethical and are putting the industry at great risk.

These wolf-clothing programs are often camouflaged with legitimate sounding names like “training bonuses, customer acquisition plans and coding bonuses.” The name alone does not condemn the program as a pyramid “laundering” system, but all too often when we uncover this camouflage we find a wolf. And, we discover that the compensation is in reality tied to headhunting. They are hunting in your pastures.

A few of these wolves can devour a lot of “sheep” investments. Again, it is my opinion that these devices cross the line of selling product and enter the realm of selling business opportunity. Thereby they constitute a significant threat to the rest of the flock.

Shepherds awake! As “wolves” get into the pasture and feel free to feed on the hopeful aspirations of the sheep who flock to their “something for nothing” promises, more wolves will feel free to work this mayhem. They are excelling. We cannot continue to turn our heads and allow these practices to infect our industry. Nor can we assume that the policing is the sole responsibility of consumer protection agencies and organizations.

What is most alarming is the attitude some shepherds are taking. “Surely if they were wolves someone would have stopped them by now.” “They can’t be that bad. After all, they are a successful public company.” “Our attorneys reviewed their practice and said it is okay, even recommendable.”

And so the shepherds are lulled into a false sense of security and return their attention to their own flocks and ignore the encroaching wolves. Worse – some of the shepherds are actually considering the greener pastures they might afford by adopting the wolves’ practices.

In a complex, competitive recruiting marketplace, short-term success at the expense of long-term principle has its allure. But, its cost, the good name and legitimate value of our products and channel of distribution, is too high a price to pay. We must not ignore nor succumb to the cunning deception of those whose rapid growth is fueled by a wolf system that will eventually fall and leave scars on the lives of its participants and the direct selling industry.

For those who are true shepherds, who are committed to the continued feeding of their flocks, who are so dependent on free access to the public pasture, it is time to raise the warning cry and the staff of defense. We must identify the wolves, drive them out.

We have a shepherd’s union. We pay for mutual defense. Has our focus to keep the dogs at bay at the gate on the hill allowed the wolves to come in through the holes in the fences in the field? Should we reexamine the defenses and the priorities of our defenders?

Again, I call wolf, wolf! Do not wait to act until they are nipping at your heels and feeding on your sheep. It is time to get more specific with the code and more vigilant in enforcing its adherence.

Doug Cloward is President and CEO of Salesforce Development Solutions, a full service direct sales consulting firm. He is an industry expert in salesforce compensation. With over 20 years of direct selling experience as a distributor, corporate executive and consultant, Mr. Cloward’s breadth of service brings a wealth of experience and timely advice. Doug can be reached at 851 East 1100 South, Spanish Fork, Utah 84660, 801-798-8874, 801-798-9504 fax.